Why digital banking is here to stay

Once upon a time, if you needed to deposit a check or pay a bill, you’d have to head to a local branch of your bank in person. However, with the rise of digital banking, going to a physical bank now seems antiquated. Chances are, you do most – if not all – of your banking online these days. With more and more businesses accepting debit and credit cards and even mobile payments, even ATM trips are becoming less necessary.

Digital banking, while not a new concept, continues to grow year over year. More people are turning to digital banking, due to convenience, efficiency and cost savings. According to a study released by the American Bankers Association in 2023, U.S. consumers preferred banking methods including mobile apps (48%) and online banking (23%) over visiting a bank (9%), ATMs (8%) and phone calls (5%).

Many banks and credit unions still have branches, but some have switched to a digital-only model. While some people still value the presence of branches, the convenience and accessibility of digital banking are unmatched.

What you'll learn:

• A brief history of digital banking
• Where are we now?
• What does the future hold?

A brief history of digital banking

Digital banking has been around since the infancy of the internet itself. Fun fact: In 1994, around 100,000 households began accessing their bank accounts online via Microsoft Money. That same year, Stanford Credit Union also began offering banking services on their website, becoming the first financial institution in the nation to offer online banking to all customers.

Where are we now?

With the advent of smartphones and mobile banking apps, digital banking has become more popular than ever. According to a 2023 American Bankers Association survey, 71 % of consumers prefer to manage their banking accounts through a mobile app or online banking.

There are some major advantages to digital banking. First, it offers convenience to the customer. Who needs to take time out of their day to swing by the bank when they can do it all with a few swipes and taps from their phone? With the rise of peer-to-peer mobile payment apps, you can even split bills and pay friends back with ease, all from your phone.

With constant access to your transactions, you can also keep close tabs on your money and spot a problem sooner. You can also set up fraud alerts, so that if there is a suspicious charge on your account, your financial institution can quickly reach you. Mobile banking allows you to sync your bank account app with other money apps to help you budget, save and reach other financial goals.

What does the future hold?

While many banks and credit unions utilize both in-person banking and digital banking, with the trend of digital banking continuously on the rise, traditional banking has declined. In 2023, according to Bankrate, 2,500 branches closed in 2023.

According to Cornerstone Advisors, people of different generations are interested in digital banks for different reasons. Millennials are after better financial management tools, debit card rewards and interest rates, while Baby Boomers and Gen Xers are mostly focused on superior interest rates.

Also known as “challenger banks” and “neo banks,” some of the pioneers in the digital banking industry include U.K-based Monzo and Atom Bank. In addition to the aforementioned benefits, customers are increasingly turning to digital banks for ease of setup and lower fees. Because of their lower overhead costs, digital banks can also generally accept customers who may be shut out of traditional financial services because of insufficient or poor credit.

If that’s not enough to convince you that digital banking is the way of the future, artificial intelligence is also being incorporated into the banking industry. By studying your bank account transaction by transaction, AI will be able to more quickly detect fraud. What’s more, this technology will “get to know” its customers and offer a more personalized experience. For example, high-net worth individuals may receive information about investment opportunities, or new parents may be prompted to open a college fund for their child.

Even if you’re not ready to give up every aspect of traditional brick-and-mortar banking in favor of a digital-only experience, digital banking is here to stay.

Alliant Credit Union is one of the only fully-digital credit unions in the nation. By being fully-digital and breaking traditional banking norms, we continue to give back to our members and even save them over $830 in 2023 due to low loan rates, high savings rates and low fees.